Health Net 1998 Annual Report Download - page 5

F O U N DAT IO N H EALT H SYST EM S, I N C. 3
$350 million at mid-ye a r. A new sense of discipline about cash management throughout the
e n t i re organization ve ry clearly paid off.
To focus on core operations, we had to divest non-core operations. F i rst among these was the
sale of our wo r ke rs ’ compensation risk-based operations, which closed in December 1998.We
received approximately $200 million cash at closing.We signed a definitive agreement to sell health
plans in Louisiana,Oklahoma and Texas. We also sold our call center operations for $36 million.
After the year-end, we entered into a definitive agreement to sell our pharmacy processing opera-
tions for $70 million and also entered into agreements to sell health plans in Colorado and New
Mexico.We intend to complete the divestiture of other non-core operations in 1999.
Clearing the decks of our non-core operations is one step forward.To realize the strength of our
core operations,in 1998 we comprehensively revamped the senior management team.
T h e re are three key changes I would like to highlight. F i rs t , our new chief financial officer, S t eve
E r w i n , has assembled a first-rate team that has imposed a tighter financial discipline at FHS. S e c o n d ,
we brought on Karen Coughlin in the Northeast in October. In a short time she has brought her
nearly 20 ye a rs of health care experience to bear on a clarified management stru c t u re and new
medical management leaders h i p .We are now known as Physicians Health Services (PHS) across the
e n t i re Northeast re gi o n , with the successful consolidation of three plans into one in 1998.
A third key step was the appointment of Cora Tellez,a seasoned health plan leader, to head Health
Net,our California health plan. In just a few months,she has had a rejuvenating effect on the
organization.Cora has put together a new management team.They will seek,in 1999,to revive
Health Net’s growth while improving service, quality and margins. Health Net is a strong and
respected player in California and as such, remains at the heart of this company.
In the pages that follow you will hear directly from Steve, Karen and Cora.You will also hear from:
Ed Munno, head of our Arizona division,which managed through a major provider crisis in 1998
with great distinction;GaryVelasquez,who leads our Government and Specialty Services opera-
tions;Bob Bruce, who is responsible for the transition of our Western operations;and Dale Terrell,
our chief technology officer, who will detail our efforts on the Year 2000 (Y2K) project.
As we look to the future of health care, our focus on strong core operations will give FHS a solid
base to meet the increasing demands of sophisticated health care consumers . By focusing on the
basics today and planning for a new and different future, we substantially enhance our ability to serve
the needs of our customers and meet the expectations of our ow n e rs .
Finally, let me recognize the contributions of Dr. Malik Hasan,who resigned as chief executive
officer in August 1998, and from the chairmanship and the board on March 1, 1999.We thank him
for his many years of tireless service. He will always be a part of FHS.
1998 re p resented the beginning of the future for FHS.T h e r e is re n e wed focus on the basics thro u g h-
out our management team and among the 14,000 FHS associates.Tog e t h e r , we are determined to
m a k e 1999 a successful year for FHS, our members and for yo u , our stockholders .
Sincerely,
Jay M. Gellert
President and Chief Executive Officer